CBDT Notification going beyond Provisions of Income Tax Act is Invalid: Bombay HC [Read Order]

In a recent decision, the Bombay High Court held that the Central Board of Direct Taxes (CBDT) notification going beyond the provisions of the Income Tax Act, 1961 is clearly invalid.

The Petitioner is aggrieved by the impugned notice dated 16th September 2021 by which respondent no.1 has proposed to proceed with the assessment for Assessment Years 2014-15 to 2020-21; the Press Release dated 7th September 2021 issued by respondent no.3 only permitting assessees who are eligible to file applications as on 31st January 2021 to make fresh applications upto 30th September 2021.

The impugned notification dated 28th September 2021 issued by respondent no.3 in terms of the impugned Press Release dated 7th September 2021 and retrospective applicability of sub-section (5) in Section 245C of the Income Tax Act inserted by the Finance Act, 2021 with retrospective effect from 1st February 2021.

In short, petitioner is challenging the order of Department of Revenue in its circular dated 28th September 2021 in as much as it restricted filing of application before the Interim Board for settlement only by those assessees who are eligible to file the application for settlement on 31st January 2021.

The counsel for the petitioner contended that if respondent no.1 had issued the notices within a reasonable time after completion of the search or after the centralization of the case, petitioner would have been eligible to make the application as on 31st January 2021. Therefore, by delaying the issue of the notices, respondent no.1 is trying to get the advantage of his own delay/of his own wrong and denying petitioner the benefit of approaching the Settlement Commission.

It was also submitted that sub-section (5) of Section 245C of the Income Tax Act, even though inserted with retrospective effect from 1st February 2021, can be given effect to only after the date when the assent of the President of India was received to promulgate the Finance Act, 2021. Sub-section (5) of Section 245C of the Income Tax Act provides that no application shall be made under this section on and after 1st February 2021. Petitioner had already made the application on 18th March 2021 when sub-section (5) was not in the statute and hence, petitioner had made the valid application as per the provisions of the Income Tax Act.

A Division Bench comprising Justices Dr. Neela Gokhale and KR Shriram observed that “Retrospective legislation cannot affect the vested rights. When the Department has extended the last date from 1st February 2021 to 30th September 2021, it can only extend the deadline but cannot introduce a new concept of eligibility as on 1st February 2021 which is not there in the Act itself. Though the CBDT relaxed the rigours of the provisions of the Act for the benefit of assessees, it is not open to the CBDT to put in new rigoursor impediments to the rights of an assessee in a Press Release or a notification which is contrary to the provisions of the Act.”

“Though the legislature has the power to make laws with retrospective effect, that power cannot be used to deprive a person of an accrued right vested in him under a statute or under the Constitution. Sub-section (5) of Section 245C of the Act, even though inserted with retrospective effect from 1st February 2021, can be given effect to only after the date when the assent of the President of India was received to promulgate the Finance Act, 2021” the Court Added.

To Read the full text of the Order CLICK HERE

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